adminsurvivor, the biggest, is about to take what amounts to a small step and become a commercial bank in its own right.
Yet in the first half of the last century the building society movement was important in Zimbabwe. Several large companies had their own society for employees and many societies had an anchor shareholder, holding the voting shares, to underpin the financial liquidity and viability of the society.
In this era, building societies were very different from banks, looking far more like today’s housing co-operatives but with a modestly more sophisticated structure, such as the ability for savers to make withdrawals in certain circumstances and with notice.
Like banks, though, deposits and withdrawals could only be made through the saver’s home branch, with several societies having only a single branch. The building societies never issued cheque books, a common form of making payment before electronic transactions, and would lend money only on the security of title deeds to people, almost always savers with the society, obtaining mortgages to buy property.
This era saw changes and growing sophistication but ended forever in the dying days of the Federation of Rhodesia and Nyasaland when property values crashed.
In some cases those with mortgages found they owned more than their property was worth and there were many stories of people in this position emigrating and just tossing their house keys on the desks of mortgage officers in the societies as they left.
The collapse saw a rapid increase in consolidation, a process already under way, with two societies in the end being created from mergers and rescues and both underwritten by two very large organisations, Old Mutual and Anglo-American. A third society with British investors continued.
All three grew into multi-branch establishments spread across the country and slowly but surely started moving towards being mini-banks. Loans were still, largely, mortgages but the odd other loan to voteless share holders were made. Societies would issue their own cheques, allowing savers to pay third parties by cheque, and in a radical move the societies were willing to process payrolls with on demand withdrawals up to the value of month’s salary; part of this move was to ensure mortgage payments were met by the society first deducting this payment before allowing a withdrawal.
For many they became cheap banks, demanding a minimum positive balance but charging no ledger fees.
The digital revolution, the advent of the debit card and the ATM, and the hyperinflation that saw the mortgage market wiped out, narrowed the gap considerably between banks and building societies. No one issued cheque books, now a dead letter in Zimbabwe, loans were hard to come by for any reason, building societies starting charging monthly fees, similar to ledger fees at banks but slightly lower.
For the ordinary wage or salary owner it did not make much difference whether one was with a bank or building society although businesses, obviously, still needed some of the extra services banks offered.
Two of the old three societies were bought by banks, and run as a provider of a more basic banking service for those not needing or desiring the fuller more expensive service and those are now being merged with their bank owners to meet new capital requirements.
The third, CABS, formed way back in the early 1960s from the merged wreckage of a number of societies, is bigger than most banks and now, it seems certain, is going to go the final mile and become a bank.
The result will be no more building societies. The moves make sense and no doubt banks will, especially since they have all agreed to re-introduce basic savings schemes, be offering a range of account types and services.
The building societies, in their battle to survive, became far more like banks than savings clubs for home buyers and the hole they leave in the market as they vanish was already there. The last steps are not going to make any significant difference. But the hole they leave, a hole that started opening up in the 1990s, will still be there. Many people need to save for a house deposit and then get a mortgage if they are ever to own their own home. This is where the RBZ and Finance Ministry must step in.
A first step would be to allow the average inefficient housing co-operative to come under some sort of regulation and be forced to follow simple rules. But more will be needed and perhaps we need to return to early decades of the last century and figure out how a small group of people can pool their savings, ensure these savings are secure, and then take turns to borrow to buy a home.
In other words we need to figure out how we can set up societies that help people save and build. And this time we ensure that they are savings societies, not mini-banks.
Capital requirements can be very low, although oversight and regulation tight.
There will be no profits, these being recycled, and no fancy service, not even payroll processing, a job to be left to banks. It could be done.
The oddities of an immigrant-driven housing market are not going to come again so the viability is not going to be questioned.
It is at least worth thinking about.
Online Reporter